DIGITAL MARKETING HUB v2.0 - AdExchanger

Digital Marketing Hub v2.0
BMO Capital Markets
Non-Television, Non-IP Advertising
Newspaper subscription rates continue to fall in most developed markets; permanent
pressure on a medium’s addressable market means permanent pressure on advertising
revenue. Magazines have generally fared better, but face similar challenges as audiences shift to
IP platforms like tablets. Moreover, print has not been able support prices as television has. For
example, while social TV is a flourishing concept, there is no such thing as social print. Certainly
many entities have been able to survive on the backs of strong brands, professional editorial
content, their own adoption of IP platforms to reach consumers, and the socialization of
these experiences. However, as long-tail content proliferates via IP technologies, barriers to distribution
(the bedrock of analog advertising business models) continue to fall, once dominant
franchises are losing market share. Elsewhere, broadcast radio and traditional outdoor/billboards
cede more of the growth in audio ads and out-of-home to streaming radio and DOOH (digitalout-of-home),
respectively. Where broadcast radio and billboards are very different from newspapers
is in their more stable addressable markets (e.g., AM/FM tuners in cars).
Direct Marketers With Larger Exposure to Print
Direct mail has much better prospects than newspapers because its addressable market –
households with mailboxes -- is stable in developed markets. Put simply, until one begins
reading stories about consumers chopping down their mailboxes, stocks with exposure to direct
mail should see relatively stable cash flows. However as younger consumers become more accustomed
to receiving phone bills via email, coupons via social networks, and compare recent
fashions on flash deal sites instead of catalogues, engagement – and thus marketing return -- will
fall over time, in our opinion. Harte Hanks’ direct marketing division has seen success lately
with its data-centric products like the Trillium business intelligence software and earned media
work for its clients on social networks. However, its Shoppers division remains largely maildriven
and puts pressure on the stock’s multiple. Valassis’ national, co-op/shared direct mail
model offers a low-cost model and the company stands as the leading contender to continue to
consolidate direct mail and newspaper insert budgets. However, its investment in digital/IP
products has only ramped up in the past few years and remain unproven.
Op-Ed
Marketing Cozies Up Closer to Commerce
In a virtual IP world, commerce services mesh much more closely with marketing services.
Under the traditional paradigm, consumers were generally marketed to in their living
rooms (television) and elsewhere in the home (reading the newspaper over breakfast), as well as
during the daily commute (radio in the car); likewise, commerce was generally reserved for after-work
and weekend visits to bricks-and-mortar retail stores. In the digital world, however,
marketing and commerce are only a click-away from each other, and often blur the distinction
completely. For example, the basic affiliate marketing model allows publishers to place offers
from e-commerce sellers on their websites (e.g., a “10% off the latest digital camera” offer is
placed on a photography bloggers’ website); when clicked, the user is often dropped right into a
shopping cart that hopefully ends in a sale for the e-commerce entity. So is that affiliate offer an
advertisement, or simply the first step in an online shopping cart process?
A member of BMO
Financial Group
13
June 7, 2012